ATM Upstart Americash Charging Ahead

Bippy M. Siegal's predictions for his automated teller machine business sound like the brash ravings of an industry neophyte.

Mr. Siegal, co-founder of year-old Americash Inc., is indeed an ATM neophyte. But he has some facts-and contracts-to back up his claim that the company will install 800 ATMs nationwide by yearend and 2,500 by next year, up from the current 160.

"We will be the premier dispenser in the country by the end of 1998," Mr. Siegal said. "And we'll be dispensing everything."

Using the latest Diebold and Fujitsu models, the company plans to diversify from cash dispensing to a smorgasbord of other services.

Mr. Siegal, 30, represents a new breed of ATM entrepreneurs hoping to cash in on the race for the burgeoning off-premises market. Since the Plus and Cirrus networks dropped their bans in April 1996 on the surcharges that machine-owners can impose on noncustomers, nonbank deployments have blossomed. Last year 48% of ATM shipments went to nonbanks, according to Mentis Corp., a research and consulting firm in Durham, N.C.

"There are now dozens if not hundreds of these organizations," said Alanna Kellogg, president of The Kellogg Group, an electronic banking consulting firm in St. Louis. Many of them "don't know anything about the ATM business, but they think they can make a buck."

Americash seems to be learning quickly. After forming their company in September 1996, Mr. Siegal and his partner and co-president, David J. Mitchell, canvassed department stores, malls, car rental agencies, and hotel chains to learn what executives wanted from an ATM deployer.

One common request was machines with multiple functions. Americash said it plans to offer movie tickets, coupons, and phone cards in the near future. It will also offer its screens as an outlet for national advertisers.

Mr. Siegal said Americash also differentiates itself by spending money and working with art directors to create machines that blend in with a store's ambience. One ATM at the luxurious ABC Carpet and Home Inc. store in New York is inside what looks like a big dollhouse.

Mr. Siegal said Americash offers its clients a portion of the revenues from the transactions. But it is the potential for revenues from other dispenser items that enticed many of Americash's clients to sign up.

The strategy of selling the machines as a dispense-all product helped Americash land its biggest deal to date-300 ATMs for Simon DeBartolo Group of Indianapolis, the owner of 186 retail properties across the country.

Mr. Siegal and Mr. Mitchell handle sales themselves, but they recruited a former Macy's department store executive as head of operations and an accountant from Coopers & Lybrand as controller.

Americash worked out a deal with Electronic Payment Services Inc. of Wilmington, Del., to drive the terminals and process transactions.

Mr. Siegal's connections in real estate and the ATM business come partly from his work as an investment adviser for seven years to families in Middle Eastern countries such as Saudi Arabia, the United Arab Emirates, and Qatar. Using contacts from his father's company, an oil and gas drilling business, Mr. Siegal matched up Middle Eastern and American companies that wanted to expand internationally.

In 1994 Mr. Siegal, tired from about six months of travel a year, looked for an American business in which to invest. At first expecting to buy a medium-size company, Mr. Siegal had second thoughts when he learned about the booming ATM business.

Mr. Siegal said he and Mr. Mitchell set about lining up investors who could bring some "added value," such as a connection to a potential client.

Americash said being able to offer the potential of revenue streams from multiple functions helped it elbow its way into DeBartolo and beat out the big ATM deployers.

"Everyone went after that account," Mr. Siegal said.

The DeBartolo deal caught the eyes of some competitors, like Jim Stewart, senior vice president at Affiliated Computer Services Inc., a Dallas-based deployer of more than 1,000 ATMs.

Mr. Stewart said Americash "scooped" the big banks.

"Owners of malls will cut deals with the owners of banks," he said. "Just from the standpoint that there is a limited number of watering holes left, whoever captures the watering holes will control the water supply."

Americash, which levies $1 to $1.50 surcharges at its machines, said it carefully scouts out locations. The company said it pays $16,000 to $30,000 per ATM but would not reveal its break-even points. In general, said Ms. Kellogg, the electronic banking consultant, a machine that costs $1,000 a month to run would break even at about 600 monthly transactions.

Richard M. Greenwood, chief executive officer of Bank Plus Corp., certainly believes in Americash. His Los Angeles-based thrift company invested about $1 million in the company-a 5% stake-and will supply the cash for its machines.

Bank Plus subsidiary Fidelity Federal Bank will own the cash in the ATMs instead of extending a line of credit. This creative deal allows Fidelity to avoid the regulatory lending limit of 15% of risk capital.

Americash has been able "to attract and acquire agreements with significant parties who control high-traffic areas," Mr. Greenwood said.

Americash has used the same kind of creativity to make plans for a host of other products at its machines, including gift certificates, coupons, and on-screen advertising.

The company has also secured agreements with other merchants that it says will bring it close to its goal of 800 machines by yearend. The customers include Avis Inc., Choice Hotels International Inc., and Taco Bell.

Organizations like Americash "are turning the ATM world upside down," said Ms. Kellogg. "They are putting (machines) in places people would never have put them before."

For instance, on top of mountains. Americash installed its first ATMs at Vail, Colo., last January.

Mr. Siegal thought the task would be easy until "we realized these machines were going to be on top of the mountain."

After arranging to have the Diebold machines hauled up on tractors to two peaks 11,000 feet above sea level, Americash had to persuade Wells Fargo, the armored car service, to put in the money.

Mr. Siegal and Mr. Mitchell, while in Vail overseeing the project, watched as armed Wells Fargo employees took the cash up in gondolas. "It was like a James Bond movie," Mr. Siegal said.

"We said, 'If we can get a machine on Vail mountain, we can put a machine anywhere in the country,'" he joked. It would have been easier to put one on a surfboard in Hawaii, he said, "because you could swim to it."

Might the freedom to surcharge make the difference there, as it has in so many other remote places? Mr. Siegal said the practice is fair as long as the fees are disclosed before transactions take place.

"You are paying for a convenience," he said.

The best off-site locations will be taken by 1999, Mr. Siegal said, and then "the only way to grow will be by acquisition."

One thing is for sure, he added. "Where there is traffic, we will be."

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